Bharti Airtel to invest Rs 60,000 crore in 3 years to improve its data and voice services

The company will make investments in upgradation and sophistication of the company's pan India network as part of Project Leap.ET Bureau | Updated: December 01, 2015, 09:56 IST

Bharti Airtel will invest Rs 60,000 crore in three years to upgrade its network as India’s biggest telco prepares to take on the challenge for data customers from newcomer Reliance Jio Infocomm apart from existing rivals Vodafone and Idea Cellular.

The investment plan, Project Leap, is set to be the biggest by an incumbent telco. It mainly entails overhauling and installing new equipment, expanding the mobilebroadband network to rural areas and laying optical fibre both locally and internationally.

It comes on the heels of Vodafone’s Rs 13,000-crore India investment plan announced last month. Jio has said it would have spent around Rs 1 lakh crore by the time of its expected 4G services launch in late December.

“The bulk of the investment will be in building infrastructure as the company has already bought most of the airwaves needed,” Gopal Vittal, Bharti Airtel’s chief executive for India and South Asia, told reporters on Monday.

It, however, includes the roughly Rs 15,000-crore capex plan the carrier has outlined for this fiscal year to March 2016. Bharti Airtel would now need only some spectrum in a few pockets in the 2100 MHz band in a few circles, Vittal said.

This band is used to offer 3G services in India. He, however, didn’t see much of an appetite for 700 MHz as yet, saying the 4G ecosystem around the band had not yet developed. He refused to comment on whether the telco would bid for it, if sold in the next auctions. The company is focussed on improving its networks to tap the next wave of growth for Indian carriers, which is expected to come from data, with growth in voice plateauing.

Bharti Airtel will set up more than 70,000 base stations in the current financial year to March 2016, making it the largest deployment in a single year since its inception.

In three years, the carrier will double its base stations from 1.60 lakh currently. It will also cumulatively increase its optic fibre network by more than 550,000 kilometres. The latest investment figure is over and above the Rs 1.6 lakh crore Airtel has already invested in its active and passive network, spectrum, fibre, submarine cables and systems till date.

Vittal denied the company was investing to stay ahead of Reliance Jio. The latter’s new networks, compared with the older ones of Airtel, are expected to be able to deliver better quality of services.

“I will not say it is in response to Reliance Jio’s launch but in response to expiry of permits which has led us to buy different configuration of spectrum,” Vittal said. “Competition doesn’t give us sleepless nights, it’s quality of services to our customers which does.”

He added that Bharti Airtel doesn’t anticipate a tariff war in the near future. “Tariffs are at an unsustainable low level, if at all, discounts have to in fact go away.”

Fears of tariff war

Analysts are concerned that a tariff war and an expected increase in capital expenditure will squeeze profits at incumbent telcos, including that of Bharti Airtel, a worry that seemed to spook investors on Monday.

It dropped 2.1% to Rs334.50 at the close, underperforming a flat broader market. “The entry of RJio, negative elasticity of pricing with volume, and data cannibalising voice revenue should limit growth even as increasing capex would limit profitability,” brokerage Jefferies said in a recent note.

Vittal, however, said the company won’t take on more debt for the investment plan and will fund it through internal cash accruals. “In terms of our debt-equity ratio we are at a comfortable 2.3 and this is a good ratio for telecom companies globally.”

On the quality of telecom networks, Vittal said the government and the regulator had helped the industry in getting new sites to set up towers and dispel fears on radiation. “We are very thankful to the telecom minister, the secretary and the regulator. All of them have helped us get 50 additional sites through NDMC and the quality of service is improving,” Vittal said.

More work needed to be done, he said. Bharti Airtel and its rivals have been criticised by the government for not investing enough to improve networks. The telecom department says this is mainly responsible for the increasing instances of call drops. Carriers dispute that and point to difficulties in establishing towers as a major reason for the poor quality of services.